Finding the silver lining After the dismal December retail sales report, investors have been awaiting the January numbers, which we saw on Monday this week. I’ll give you the bad news first. The December numbers were actually revised further downward to -1.6% (compared to the initial -1.2% number), which is the biggest drop in retail sales since September 2009 when we were clawing back from the GFC. Now the good news. Retail sales increased 0.2% in January, which is higher than expected, driven by sales for building materials and discretionary spending. Compared to January last year, retail sales actually increased 2.3%. Moral of the story: January retail sales tend to be lower than those in December given…

The first shoe dropped… Monday morning brought news that a trade deal with China was nearing, causing stocks to rally. However, given most investors believed a resolution to already be priced into the market, they took advantage of these elevated prices to cash in some of their gains, and this sell-off brought stocks right back down again. While the markets are already expecting a trade deal by the end of March, there is still a significant amount of uncertainty around the details and, therefore, true impact on the economy. Reaching a deal itself is important, but the bigger concern for the US (and others around the world) is going to be the…

Growing, going, gone? GDP for the 4th quarter of 2018 increased 2.6%, which was higher than what the market was expecting. Consumer spending grew at 2.8%, which is significantly slower than the 3.5%+ pace we saw earlier this year (remember the horrible retail sales data for December?). Growth in business investment surprised the market to the upside, rising 6.2%, while residential investment declined for the 4th straight quarter (more on this later). And as predicted by the crystal ball of the Philly Fed’s survey last week, the ISM Manufacturing Index came in below expectations and fell 2.4 points in February driven by a decrease in new orders, employment, and production. However, while we continue to see signs building for…

Counting the minutes FOMC meeting minutes are issued three weeks after each meeting and help inform the market of the Fed’s thoughts on monetary policy changes (or lack thereof). The last Fed meeting indicated a big shift from further interest rate hikes to a pause on interest rate hikes, so the market has been waiting to fully understand the Fed’s thought process behind this more dovish outlook. The meeting minutes were generally optimistic due to the strengthening labor market and solid GDP while the key area of concern (appropriately so) was slowing global growth. Moral of the story: The FOMC members seem to be in agreement about approaching future interest rate…

#fakenews Because of the government shutdown, we hadn’t received retail sales numbers from the Commerce Department until this week’s report that showed December retail sales plummeted 1.2%, printing the worst report since 2009. This number was a big surprise to economists who were expecting a 0.2% gain. The weakness was across all categories, including a 3.9% decline in online sales, which is a little strange when major online retailers, like Amazon, reported one of the best holiday seasons in years. This report was actually so bad that economists are crying #fakenews on this one and trying to point fingers at any rationale to prove this is a one-time anomaly –…

State of the Union This week we heard President Trump’s State of the Union address, during which he called for a bipartisan push for an infrastructure bill and lowered drug prices along with continued spending on defense. While spending $1.5 trillion on infrastructure over the next decade was part of Trump’s presidential campaign, the passing of an infrastructure bill seems unlikely without raising taxes to fund this level of spending. In terms of defense spending, the government is expected to spend around $716 billion in 2019. Moral of the story: Depending on the ability for Congress to play nice and actually make things happen, there are winners and losers in…

Fed speak The Fed held its first policy meeting of the year this past week and let me tell you, the markets were ecstatic at what they heard. The FOMC voted unanimously to keep rates unchanged, which was the consensus expectation. The real game changer here was the clear messaging from Fed Chairman Jerome Powell after the policy meeting: the Fed intends to be patient and consider economic conditions as it determines future interest rate and liquidity moves. Stocks rallied in a big way on this reassurance. Moral of the story: This is the second time the Fed has given us confidence that it won’t determine policy with a blind eye…

Light at the End of the Tunnel Early Friday afternoon, we finally got news that Congress had reached a conclusion to temporarily reopen and fund the government for three weeks, and the bill was signed by President Trump late Friday night. Once the government opens, both parties are expected set up a conference committee to propose an appropriations bill for Homeland Security. Of course, the President has threatened to shut down the government again if he doesn’t get funding for his wall (or just declare a national emergency and build the wall without Congressional approval). Time will tell whether legislators can find a productive resolution, which could also include a potential…

Trade Charade On Thursday, we got news that US officials were thinking about easing some of the tariffs against China, which sent stocks higher. Then later that day, the White House came out and said loljk that’s not actually happening now, which brought stocks down again. But then China extended an olive branch on Friday by offering to increase its purchases of US goods by more than $1 trillion over six years with the goal of reducing the annual US trade deficit to zero, which sent stocks soaring again on Friday. This might go down as the most “on again, off again” relationship story of 2019, brb let me grab my bowl of popcorn…

Retail Me Not Macy’s was definitely not giving thanks for their parade to the bottom of the board this week, falling 17.7% on Thursday after they reduced their guidance for sales and earnings after upgrading it only two months ago. The catalyst? Consumers had put up the best holiday sales numbers in six years at the beginning of the holiday season (Black Friday), but then basically just stopped shopping until Christmas so retail sales were really weak in December. Numbers from Target and Costco were a little more promising but the headline news about Macy’s brought down stocks across the entire retail sector – Kohl’s, L Brands, and Nordstrom were among…